EXHIBIT
10.60


 


BLACK BEAUTY COAL COMPANY


LGE Contract # LGE02012


KU Contract # KUF02857


Amendment No. 1


 


AMENDMENT NO. 1 TO COAL SUPPLY AGREEMENT


 


THIS
AMENDMENT NO. 1 TO COAL SUPPLY AGREEMENT (“Amendment No. 1”) is entered into effective
as of January 1, 2004, by and between LOUISVILLE GAS AND ELECTRIC COMPANY
(“LG&E”) and KENTUCKY UTILITIES COMPANY (“KU”), each a Kentucky
corporation, 220 West Main Street, Louisville, Kentucky 40202 (Buyer”), and
BLACK BEAUTY COAL COMPANY, an Indiana partnership, 414 South Fares Avenue,
Evansville, Indiana 47702, (“Seller”).


 


1.0 AMENDMENTS


 


The Agreement heretofore
entered into by the parties, dated effective January 1, 2002 and identified by
the Contract Numbers set forth above, is hereby amended as follows. The January
1, 2002 Agreement and Amendment No. 1 is hereafter referred to as the
“Agreement”:


 


2.0 TERM


 


2.1                                 Section 2.0 Term,
is deleted and replaced with the following provision:


 


Term.  The term of this Agreement shall commence on
January 1, 2002 and shall continue through December 31, 2007, subject to the
price review set forth in § 8.1.


 


3.0
QUANTITY


 


3.1                                 Section 3.1 Base Quantity,  is deleted and replaced with the following
provision:


 


3.1           Base
Quantity.  Seller shall sell and deliver and Buyer shall purchase
and accept delivery of the following annual quantities of coal:


 




	
  YEAR

  	
   

  	
  BASE
  QUANTITY (TONS)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2004

  	
   

  	
  1,000,000

  	
  (1)

  
	
  2005

  	
   

  	
  1,000,000

  	
  (1)

  
	
  2006

  	
   

  	
  1,000,000

  	
  (2)

  
	
  2007

  	
   

  	
  1,000,000

  	
  (2)

  






 












(1) Buyer will
specify at Buyer’s sole option, a minimum of 500,000 tons of Quality 1 up to a
maximum of 700,000 tons of Quality 1. The remainder of the Base Quantity shall
be Quality 2.


(2) Pricing
and Base Quantity subject to review set forth in § 8.1.


 


The Base
Quantity will be delivered in approximately equal monthly quantities and in
accordance with a mutually agreed upon schedule.


 

















 


4.0          SOURCE


 


4.1                                 Section 4.1 Source  is deleted and replaced with the
following provision:


 


Section 4.1 Source.  The coal sold hereunder shall
be supplied primarily from geological seam Indiana #6 and #5, from Seller’s
Somerville Mine Complex located in Gibson County, Indiana (the “Coal
Property”).


 


5.0          QUALITY


 


5.1                                 Section 6.1 Specifications  is deleted and replaced
with the following provision:


 


Section 6.1 Specifications.


 


(a) The coal
delivered hereunder shall conform to the following specifications on an “as
received” basis:


 


	
  Guaranteed Monthly Specifications

  	
   

  	
  Weighted
  Average (1)

  	
   

  	
  Rejection
  Limits

  (per shipment)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.T.U./lb.

  	
   

  	
  min. 11 000

  	
   

  	
  <

  	
   

  	
  10 700

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CHLORINE

  	
   

  	
  max. 0.03

  	
   

  	
  >

  	
   

  	
  0.04

  	
   

  
	
  FLUORINE

  	
   

  	
  max. 0.005

  	
   

  	
  >

  	
   

  	
  0.006

  	
   

  
	
  NITROGEN

  	
   

  	
  max. 1.40

  	
   

  	
  >

  	
   

  	
  1.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ASH/SULFUR
  RATIO

  	
   

  	
  min. 2.70:1

  	
   

  	
  <

  	
   

  	
  2.40:1

  	
   

  
	
  SIZE (3” x
  0”):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Top size
  (inches)**

  	
   

  	
  max. 3x0

  	
   

  	
  >

  	
   

  	
  3x0 

  	
   

  
	
  Fines (% by
  wgt)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Passing 1/4” screen

  	
   

  	
  max. 40

  	
   

  	
  >

  	
   

  	
  50

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BY WEIGHT:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VOLATILE

  	
   

  	
  min. 32

  	
   

  	
  <

  	
   

  	
  30

  	
   

  
	
  FIXED CARBON

  	
   

  	
  min. 40

  	
   

  	
  <

  	
   

  	
  38

  	
   

  
	
  GRINDABILITY (HGI)

  	
   

  	
  min. 50

  	
   

  	
  <

  	
   

  	
  48

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BASE ACID RATIO (B/A)

  	
   

  	
  .55

  	
   

  	
  >

  	
   

  	
  .60

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SLAGGING FACTOR***

  	
   

  	
  max. 2.40

  	
   

  	
  >

  	
   

  	
  2.60

  	
   

  
	
  FOULING FACTOR****

  	
   

  	
  max. .35

  	
   

  	
  >

  	
   

  	
  .40

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ASH
  FUSION TEMPERATURE (°F) (ASTM D1857)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  REDUCING ATMOSPHERE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Initial Deformation

  	
   

  	
  min. 2000

  	
   

  	
  min.

  	
   

  	
  1925

  	
   

  
	
  Softening (H=W)

  	
   

  	
  min. 2025

  	
   

  	
  min.

  	
   

  	
  1990

  	
   

  
	
  Softening (H=1/2W)

  	
   

  	
  min. 2050

  	
   

  	
  min.

  	
   

  	
  2025

  	
   

  
	
  Fluid

  	
   

  	
  min. 2125

  	
   

  	
  min.

  	
   

  	
  2100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OXIDIZING ATMOSPHERE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Initial Deformation 

  	
   

  	
  min.

  	
   

  	
  min.

  	
   

  	
   

  	
   

  
	
  Softening (H=W)

  	
   

  	
  min.

  	
   

  	
  min.

  	
   

  	
   

  	
   

  
	
  Softening (H=1/2W)

  	
   

  	
  min.

  	
   

  	
  min.

  	
   

  	
   

  	
   

  
	
  Fluid

  	
   

  	
  min.

  	
   

  	
  min.

  	
   

  	
   

  	
   

  



 












(1)          An actual Monthly Weighted Average will be calculated for each
specification for coal delivered to the Louisville Gas and Electric generating
stations and a separate actual Monthly Weighted Average will be calculated for
each specification for coal delivered to the Kentucky Utility generating
stations.


 


**  All the coal will be of such size that it will pass through a
screen having circular perforations three (3) inches in diameter, but shall not
contain more than fifty per cent (50%) by weight of coal that will pass through
a screen having circular perforations one-quarter (1/4) of an inch in diameter.


 


***                           Slagging Factor (Rs)=(B/A) x
(Percent Sulfur by WeightDry)

Fouling Factor (Rf)=(B/A) x (Percent Na20 by WeightDry)


 

















 


The Base Acid
Ratio (B/A) is herein defined as:


	
  BASE ACID
  RATIO (B/A) =

  	
   

  	
  (Fe2O3
  + CaO + MgO + Na2O + K2O

  	
   

  
	
   

  	
   

  	
  (Si02 + A1203 + Ti02)

  	
   

  



 


	
  Note: As
  used herein

  	
   

  	
  >

  	
   

  	
  means
  greater than:

  
	
   

  	
   

  	
  <

  	
   

  	
  means less
  than.

  



 


b) In addition
to the specifications set forth in § 6.1(a), the coal delivered hereunder
designated as Quality 1 shall conform on an “as received” basis to the
following specifications:


 


QUALITY
1 (1)


 


	
  Specifications

  	
   

  	
  Guaranteed
  Monthly

  Weighted Average (2)

  	
   

  	
  Rejection
  Limits

  (per shipment)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  lbs./MMB.T.U.

  	
   

  	
   

  	
   

  	
   

  
	
  Sulfur

  	
   

  	
  max.

  	
   3.00

  	
   

  	
   

  	
   

  	
  > 3.25

  
	
  Ash

  	
   

  	
  max.

  	
  10.50

  	
   

  	
   

  	
   

  	
  > 11.10

  
	
  Moisture

  	
   

  	
  max.

  	
  13.0

  	
   

  	
   

  	
   

  	
  > 14.10

  



 












(1) Buyer will
specify on a monthly basis, the qualities (Quality 1 and/or Quality 2) that are
to be delivered during a calendar month, no later than twenty (20) days prior
to the start of that month. During any calendar year during the term of this
Agreement, Buyer shall specify on an annual basis, an annual total of at least
500,000 tons and a maximum of 700,000 tons of the base quantity tons for that
calendar year as Quality 1. The remainder of the base quantity tons shall be
Quality 2.


 


(2) An actual
Monthly Weighted Average will be calculated for each specification for coal
delivered to the Louisville Gas and Electric generating stations and a separate
actual Monthly Weighted Average will be calculated for each specification for
coal delivered to the Kentucky Utility generating stations.


 

















 


(c) In
addition to the specifications set forth in § 6.1(a), the coal delivered
hereunder designated as Quality 2 shall conform on an “as received” basis to
the following specifications:


 


QUALITY
2 (1)


 


	
  Specifications

  	
   

  	
  Guaranteed
  Monthly

  Weighted Average (2)

  	
   

  	
  Rejection
  Limits

  (per shipment)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  lbs./MMB.T.U.

  	
   

  	
   

  	
   

  	
   

  
	
  Sulfur

  	
   

  	
  max.

  	
   3.20

  	
   

  	
   

  	
   

  	
  > 3.50

  
	
  Ash

  	
   

  	
  max.

  	
  10.70

  	
   

  	
   

  	
   

  	
  > 11.50

  
	
  Moisture

  	
   

  	
  max.

  	
  12.50

  	
   

  	
   

  	
   

  	
  > 13.45

  



 












(1) Buyer will
specify on a monthly basis, the qualities (Quality 1 and/or Quality 2) that are
to be delivered during a calendar month, no later than twenty (20) days prior
to the start of that month. During any calendar year during the term of this
Agreement, Buyer shall specify on an annual basis, an annual total of at least
500,000 tons and a maximum of 700,000 tons of the base quantity tons for that
calendar year as Quality 1. The remainder of the base quantity tons shall be
Quality 2.


 


(2) An actual
Monthly Weighted Average will be calculated for each specification for coal
delivered to the Louisville Gas and Electric generating stations and a separate
actual Monthly Weighted Average will be calculated for each specification for
coal delivered to the Kentucky Utility generating stations.


 

















 


5.2                                 Section 6.4 Suspension and Termination  is deleted
and replaced with the following provision:


 


If the coal
sold hereunder fails to meet one (1) or more of the Guaranteed Monthly Weighted
Averages set forth in § 6.1 (as to either or both of LG&E or KU) for any
two (2) consecutive months or a total of three (3) months in a six (6) month
period, or if six (6) barge shipments in a thirty (30) day period are
rejectable by Buyer, or if Buyer receives at generating station(s) two (2) rail
shipments which are rejectable in any thirty (30) day period, then Buyer may
upon notice confirmed in writing and sent to Seller by certified mail, suspend
future shipments except shipments already loaded into barges and/or railcars.
Seller shall, within ten (10) days, provide Buyer with reasonable assurances
that subsequent monthly deliveries of coal shall meet or exceed the Guaranteed Monthly Weighted
Averages set forth in § 6.1. If Seller fails to provide such assurances within
said ten (10) day period, Buyer may terminate this Agreement by giving written
notice of such termination at the end of the ten (10) day period. A waiver of
this right for any one (1) period by Buyer shall not constitute a waiver for
subsequent periods. If Seller provides such assurances to Buyer’s reasonable
satisfaction, shipments hereunder shall resume and any tonnage deficiencies
resulting from suspension may be made up at Buyer’s sole option. Buyer shall
not unreasonably withhold its acceptance of Seller’s assurances, or delay the
resumption of shipment. If Seller, after providing such assurances, fails to
meet any of the Guaranteed Monthly Weighted Averages (as to either LG&E or
KU) for any one (1) month within the next six (6) months or if three (3) barge
shipments or one (1) rail shipment are rejectable within any one (1) month
during such six (6) month period, then Buyer may terminate this Agreement and
exercise all its other rights and remedies under applicable law and in equity
for Seller’s breach.


 

















 


6.0                               PRICE


 


6.1                                 Section
8.1 Base Price  is deleted
and replaced with the following provision:


 


8.1 Base Price.  The base price (“Base
Price”) of the coal to be sold hereunder will be firm and will be based on
$/MMBtu and will be determined by the year in which the coal is delivered as
defined in § 5 in accordance with the following schedule:


 


BASE
PRICE—QUALITY 1


 


	
  YEAR

  	
   

  	
  ($ Per MMBTU)

  	
   

  	
  ($ Per Ton)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2004

  	
   

  	
  $.96591
  F.O.B. Railcar

  	
   

  	
  $21.25
  F.O.B. Railcar

  
	
   

  	
   

  	
  $1.1477
  F.O.B. Barge

  	
   

  	
  $25.25
  F.O.B. Barge

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2005

  	
   

  	
  $.96591
  F.O.B. Railcar

  	
   

  	
  $21.25
  F.O.B. Railcar

  
	
   

  	
   

  	
  $1.1477
  F.O.B. Barge

  	
   

  	
  $25.25
  F.O.B. Barge

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  *

  	
   

  	
  *

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2007

  	
   

  	
  *

  	
   

  	
  *

  



 


BASE PRICE—QUALITY 2


 


	
  YEAR

  	
   

  	
  ($ Per MMBTU)

  	
   

  	
  ($ Per Ton)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2004

  	
   

  	
  $1.0568 F.O.B. Barge

  	
   

  	
  $23.25 F.O.B. Barge

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2005

  	
   

  	
  $1.0568
  F.O.B. Barge

  	
   

  	
  $23.25
  F.O.B. Barge

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2007

  	
   

  	
   

  	
   

  	
   

  



 












* Buyer and
Seller will begin negotiations on price, quantity and other terms and
conditions on or before June 1, 2005 for prices and quantities to be effective
during the years 2006 and 2007. The parties then shall attempt to negotiate on
new prices, quantities and/other terms and conditions between June 1, 2005 and
August 1, 2005. If the parties do not reach an agreement by August 1, 2005,
then this Agreement will terminate as of December 31, 2005 without liability due
to such termination for either party. Notwithstanding anything herein to the
contrary, the Base Price and Base Quantity set forth herein for the years 2006
and 2007 are for use as reference points for the negotiations described in this
paragraph and the parties do not intend to be bound by any terms and conditions
relating to the years 2006 and 2007 (including Base Price and Base Quantity)
unless and until the parties reach a mutually acceptable agreement by August 1,
2005 and execute a written amendment expressly setting forth the Base Price,
Base Quantity and any other terms and conditions agreed to for 2006 and 2007.
This clause shall not be interpreted as a Right of First Refusal or exclusive
supply agreement.


 

















 


6.2                                 Section
8.2(b) is deleted and replaced with the following provision:


 


8.2 (b)               Notwithstanding the foregoing, for each
specification, there shall be no discount if the actual Monthly Weighted
Average meets the applicable Discount Point set forth below. Actual Monthly
Weighted Averages will be separately calculated for the Louisville Gas and
Electric generating stations and for the Kentucky Utility generating stations.
However, if the actual Monthly Weighted Average for the Louisville Gas and
Electric generating stations and/or the Kentucky Utility generating stations
fail to meet such applicable Discount Point, then the discount shall apply to
and shall be calculated on the basis of the difference between the actual
Monthly Weighted Average and the Guaranteed Monthly Weighted Average pursuant
to the methodology shown in Exhibit A attached hereto. The discount will be
applied only to the particular company whose actual Monthly Weighted Average
failed to meet the Discount Points.


 


QUALITY
1


 


	
  Guaranteed
  Monthly Weighted Average

  	
   

  	
  Discount Point

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BTU

  	
   

  	
  Min. 11,000 BTU/LB

  	
   

  	
  10,850 BTU/LB

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ASH

  	
   

  	
  Max. 10.50 LB/MMBTU

  	
   

  	
  10.80 LB/MMBTU

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MOISTURE

  	
   

  	
  Max. 13.00 LB/MMBTU

  	
   

  	
  13.50 LB/MMBTU

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SULFUR

  	
   

  	
  Max. 3.00
  LB/MMBTU

  	
   

  	
  3.05
  LB/MMBTU

  



 


 

















 


QUALITY
2


 


	
  Guaranteed
  Monthly Weighted Average

  	
   

  	
  Discount Point

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BTU

  	
   

  	
  Min. 11,000 BTU/LB

  	
   

  	
  10,850 BTU/LB

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ASH

  	
   

  	
  Max. 10.70
  LB/MMBTU

  	
   

  	
  11.10
  LB/MMBTU

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MOISTURE

  	
   

  	
  Max. 12.50
  LB/MMBTU

  	
   

  	
  12.95
  LB/MMBTU

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SULFUR

  	
   

  	
  Max. 3.20
  LB/MMBTU

  	
   

  	
  3.30
  LB/MMBTU

  



 


For example,
if the actual Monthly Weighted Average of ash (For Quality 1) equals 11.20
lb/MMBTU, then the applicable discount would be (I 1.201b. - 10.501b.) X
..0083/lb/MMBTU = $.00581/MMBTU.


 


7.0
CREDIT RATING


 


7.1                                 Section 21.0 CREDIT RATING  is added as follows.


 


SECTION 21.0     CREDIT
RATING


 


If the Credit
Rating (as defined below) of either Buyer (if Buyer has a public rating) falls
below Investment Grade Rating (as defined below), Buyer shall, within five (5)
days after Seller’s written request, provide Seller with a mutually agreed upon
form of credit enhancement (e.g., letter of credit, guaranty from an investment
grade entity, etc.). If no such form of credit enhancement is received by
Seller, then Seller has the right to require payment in cash at the time of
delivery. Such mutually acceptable assurances of good credit shall not be more
than the average monthly outstanding net balance.


 


“Credit
Rating” means, with respect to any entity, the rating then assigned to such
entity’s unsecured, senior long-term debt obligations (not supported by third
party credit enhancements) or if such entity does not have a rating for its
senior unsecured long-term debt, then the rating then assigned to such entity
as an issues rating by S&P, Moody’s or any other rating agency agreed by
the Parties as set forth in the Cover Sheet.


 


“Investment
Grade Rating” shall mean a party’s unsecured, senior long-term debt obligations
(not supported by third party credit enhancements) rating from Moody’s of
“Baa3” or higher and a rating from S&P of “BBB-” or higher. Moody’s shall
mean Moody’s Investor Services, Inc. or its successors. S&P shall mean the
Standard & Poor’s Rating Group (a division of McGraw-Hill Inc.) or its
successors.


 

















 


IN WITNESS
WHEREOF, the parties
hereto have executed this Amendment No. 1 on the day and year below written,
but effective as of the day and year first set forth above.


 


 


	
  LOUISVILLE
  GAS AND ELECTRIC

  COMPANY

  	
  BLACK
  BEAUTY COAL COMPANY

  
	
   

  	
   

  
	
  BY:

  	
   

  	
   

  	
  BY:

  	
   

  	
   

  
	
   

  	
  Paul
  Thompson

  	
   

  
	
   

  	
  SVP -
  Energy Services

  	
  TITLE:

  
	
   

  	
   

  
	
   

  	
   

  
	
  DATE:

  	
   

  	
   

  	
  DATE:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  KENTUCKY
  UTILITIES COMPANY

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Paul
  Thompson

  	
   

  
	
   

  	
  SVP -
  Energy Services

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date: